Guinness Nigeria Plc held its Extra Ordinary General Meeting on Tuesday where its shareholders approved a N40 billion rights issue. However, the event was not without its usual moments. Nairametrics was at the event and noted the following;
Guinness Nigeria Plc this afternoon held an extra ordinary general meeting (EGM). While the main agenda is to get shareholders approval for a rights issue of N40 billion, there were other resolutions that gave shareholders some concern.
- Resolution 1b seeks to authorize the Directors of the company to apply any outstanding loan facilities towards payment of rights issue.
- This means, shareholder loans will be converted into equity thus no new capital will be injected the company (though they might claim cash will also not exit the business).
- The question however was, if the rights issue is for the purpose of raising working capital, why then is Diageo seeking to convert its loan into equity?
- Also, Resolution 1c seeks the waiver of the pre-emptive rights of shareholders to any unsubscribed shares and authorise the directors to issue such shares to interested parties. Who are these interested parties who are not current shareholders ?
- In a rather surprising observation, the resolutions dd not include the freedom of shareholders to trade their rights. While the chairman took of note of the observation, we are unsure of how this will be implemented, considering that it wasn’t officially approved along with other resolutions that had been passed.
- At the EGM, Babatunde Savage, the chairman refused to state whether Diageo had intentions of converting their debt into equity. He also initially refused to state how much Guinness Nigeria owed, despite repeated inquiry by Nona Awoh a shareholder and activist. After claiming that the closed period prevented him from stating a figure, he mentioned the sum of 9.8 billion naira as at September 2016. Guinness 2016 first quarter results ending September 2016 showed a total debt of about N33 billion.
Some shareholders we spoke to opined that it appeared that the rights issue is an indirect means of Diageo to acquire a majority stake in Guinness Nigeria Plc, seeing that their prior plan to acquire at about N175 per share did not work.
Whilst, they see nothing technically wrong with Diageo paying for its rights by converting its loan to equity, the optics appear to suggest cash flow challenges still persist. Since no major fresh capital will be injected into the company, they might still need to draw on the balance of the $30 million credit line offered by Diageo.
Guinness just last November paid dividends of about N750 million (50 kobo per share) to its shareholders.